The effects of incentive and constraint of external governance environment on investment behavior
Good corporate governance mechanism requires not only support of internal governance, but is also affected by external environment. A series of studies by La Porta et al encourage people to pay more attention to the effect of external governance environment on corporate decisions.
（3）Incentive effect of regional innovation capability. GEM is established to provide equity financing service to "Two High and Five New" enterprises and the core index to examine whether an enterprise can go public in GEM is its growth, innovation and high technology. The development of an enterprise is inseparable from its growth environment, and its innovation capability is closely related to investment in scientific research by local government, the local education situation and economic development, resident income and other factors. GEM listed companies are from different regions, and there are notable differences between different regions in their cultivation and support of innovation capability and emerging industries. (Liu Xielin, Chen Ao, 2012). Regions with better innovation capability better support the high-tech industry, and have better supporting system and policies. These factors guide and encourage high-tech enterprises to make efficient investment decisions. Therefore, this thesis proposes hypothesis 4:
Hypothesis 4: if other conditions remain unchanged, better regional innovation capability has the incentive effect on relieving inefficient investment.
（2） The constraint effect of regional legal environment. A series of studies by La Porta et al have shown that the corporate governance and structure depend largely on the rule of law of the country. On one hand, China's relevant laws have not played the role to protect corporate intellectual property, and infringement of other's research results occurred from time to time, which leads to little investment in technology research and development by Chinese enterprises, and the surplus cash flow goes to fields of non-speciality, and thus reduces the investment efficiency. On the other hand, in China's stock market, although the interests of investors are protected by "Securities Law", the cases of companies' executives cheating investors and large shareholders cheating medium and small shareholders are often seen. One of important reasons for the above problems is that relevant laws have not been effectively implemented. Although national laws are applied to all GEM companies from different regions, level and efforts of law enforcement significantly vary in different regions. It can be predicted that a region's legal environment is better, the interests of corporate investors are more likely to be protected by law, and thus companies can make efficient investment decisions. Therefore, this thesis proposes hypothesis 5: